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Black–Derman–Toy model

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Step 2. Once solved, retain these known short rates, and proceed to the next time-step (i.e. input spot-rate), "growing" the tree until it incorporates the full input yield-curve.
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discount recursively through the tree using the rate at each node, i.e. via "backwards induction", from the time-step in question to the first node in the tree (i.e. i=0);
614: 1901: 583: 544: 2504: 1497: 934: 454: 750: 2034: 2014: 277:-prices for each component caplet); see aside. Using the calibrated lattice one can then value a variety of more complex interest-rate sensitive securities and 2418: 1451: 2335: 2345: 2019: 1457: 986: 2029: 2387: 2102: 2284: 2574: 2564: 2087: 1064: 2474: 2438: 2391: 2742: 2479: 1387: 1589: 1490: 1382: 55: 2544: 2122: 2092: 2395: 2379: 960: 2589: 2294: 1514: 285: 2494: 2459: 2428: 2423: 1859: 1776: 722: 2433: 1761: 2768: 2057: 1864: 1377: 1253: 879: 622: 250: 1783: 2519: 2399: 2747: 2524: 2360: 2259: 2244: 1656: 1572: 1483: 2534: 2170: 294: 284:
Although initially developed for a lattice-based environment, the model has been shown to imply the following continuous
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factor—the short rate—determines the future evolution of all interest rates. It was the first model to combine the
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find all other rates in the time-step, where these are linked to the node immediately above (r
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in 1990. A personal account of the development of the model is provided in Emanuel Derman's
175: 144: 2694: 2594: 2579: 2340: 2274: 1952: 1896: 1879: 1624: 1430: 1420: 1223: 1213: 1208: 1137: 547: 2509: 1741: 438: 799:"Society of Actuaries Professional Actuarial Specialty Guide Asset-Liability Management" 137:(this node-spacing being consistent with p = 50%; Δt being the length of the time-step); 2699: 2664: 2584: 2190: 1937: 1854: 1823: 1818: 1798: 1788: 1731: 1726: 1706: 1686: 1651: 1619: 1602: 1331: 1316: 1281: 1268: 1243: 1147: 1115: 1084: 971: 219: 2762: 2601: 2142: 1979: 1974: 1932: 1874: 1696: 1612: 1552: 1435: 1410: 1321: 1306: 1296: 1248: 1188: 1178: 706: 223: 215: 148: 2659: 2621: 2175: 2107: 1996: 1991: 1803: 1736: 1711: 1547: 1346: 1291: 1238: 1168: 1094: 956: 935:"A One-Factor Model of Interest Rates and Its Application to Treasury Bond Options" 875: 786: 254: 2239: 751:"Impact of Different Interest Rate Models on Bond Value Measures, G, Buetow et al" 1012: 2704: 2223: 2218: 2213: 2203: 2006: 1947: 1942: 1906: 1666: 1557: 1402: 1341: 1301: 1276: 1152: 1120: 1110: 1073: 992:. Technical Note No. 23, Options, Futures, and Other Derivatives. Archived from 258: 179: 257:
the model parameters to fit both the current term structure of interest rates (
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repeat until the discounted value at the first node in the tree equals the
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Generalized autoregressive conditional heteroskedasticity (GARCH) model
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One reason that the model remains popular, is that the "standard"
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adjust the rate at the top-most node at the current time-step, i;
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Calibrating the Black–Derman-Toy model: some theoretical results
130:{\displaystyle \ln(r_{u}/r_{d})/2=\sigma _{i}{\sqrt {\Delta t}}} 1479: 1046: 1042: 1031:
R function for computing the Black–Derman–Toy short rate tree
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Autoregressive conditional heteroskedasticity (ARCH) model
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Independent and identically distributed random variables
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Black, F.; Derman, E.; Toy, W. (January–February 1990).
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Lattice model (finance) § Interest rate derivatives
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For constant (time independent) short rate volatility,
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Autoregressive integrated moving average (ARIMA) model
1018:. Seminar Financial Engineering, University of Vienna. 15: 1464:
Securities Industry and Financial Markets Association
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It is a one-factor model; that is, a single 1491: 1058: 8: 2030:Autoregressive–moving-average (ARMA) model 1498: 1484: 1476: 1452:Commercial Mortgage Securities Association 1065: 1051: 1043: 678: 670: 657: 651: 624: 605: 600: 574: 568: 559: 535: 529: 523: 505: 499: 493: 475: 469: 463: 445: 440: 411: 403: 397: 356: 343: 337: 328: 296: 117: 111: 96: 87: 78: 72: 57: 1458:International Capital Market Association 878:, Ken Seng Tan and Weidong Tian (2001). 745: 743: 456:= the instantaneous short rate at time t 1037:Excel BDT calculator and tree generator 739: 2336:Doob's martingale convergence theorems 226:in the 1980s and was published in the 20:Short-rate tree calibration under BDT: 2088:Constant elasticity of variance (CEV) 2078:Chan–Karolyi–Longstaff–Sanders (CKLS) 926:Mathematica in Education and Research 202:behaviour of the short rate with the 7: 1388:Commercial mortgage-backed security 2575:Skorokhod's representation theorem 2356:Law of large numbers (weak/strong) 1383:Collateralized mortgage obligation 987:"The Black, Derman, and Toy Model" 119: 14: 2545:Martingale representation theorem 917:Benninga, S.; Wiener, Z. (1998). 2590:Stochastic differential equation 2480:Doob's optional stopping theorem 2475:Doob–Meyer decomposition theorem 919:"Binomial Term Structure Models" 286:stochastic differential equation 52:being the node in question) via 2460:Convergence of random variables 2346:Fisher–Tippett–Gnedenko theorem 516:= instant short rate volatility 2058:Binomial options pricing model 1378:Collateralized debt obligation 1254:Reverse convertible securities 641: 635: 376: 370: 313: 307: 206:, and is still widely used. 93: 65: 1: 2525:Kolmogorov continuity theorem 2361:Law of the iterated logarithm 509:{\displaystyle \sigma _{t}\,} 479:{\displaystyle \theta _{t}\,} 2530:Kolmogorov extension theorem 2209:Generalized queueing network 1717:Interacting particle systems 1011:Klose, C.; Li C. Y. (2003). 968:Applied Mathematical Finance 959:; Tan, K.; Tian, W. (2001). 214:The model was introduced by 1662:Continuous-time random walk 1194:Contingent convertible bond 147:corresponding to the given 2800: 2670:Extreme value theory (EVT) 2470:Doob decomposition theorem 1762:Ornstein–Uhlenbeck process 1533:Chinese restaurant process 1234:Inverse floating rate note 970:: 8, 27–48. Archived from 942:Financial Analysts Journal 229:Financial Analysts Journal 2738: 2550:Optional stopping theorem 2351:Large deviation principle 2103:Heath–Jarrow–Morton (HJM) 2040:Moving-average (MA) model 2025:Autoregressive (AR) model 1850:Hidden Markov model (HMM) 1784:Schramm–Loewner evolution 1080: 609:{\displaystyle \sigma \,} 279:interest rate derivatives 188:interest rate derivatives 2465:Doléans-Dade exponential 2295:Progressively measurable 2093:Cox–Ingersoll–Ross (CIR) 1393:Mortgage-backed security 1162:Types of bonds by payout 1104:Types of bonds by issuer 852:"Black-Derman-Toy (BDT)" 717:language, and not using 578:{\displaystyle dW_{t}\,} 27:of an up move, p, to 50% 25:risk-neutral probability 2685:Mathematical statistics 2675:Large deviations theory 2505:Infinitesimal generator 2366:Maximal ergodic theorem 2285:Piecewise-deterministic 1887:Random dynamical system 1752:Markov additive process 944:: 24–32. Archived from 699:Root-finding algorithms 539:{\displaystyle W_{t}\,} 204:log-normal distribution 178:used in the pricing of 151:for the i-th time-step. 29:Step 1. For each input 2520:Karhunen–Loève theorem 2455:Cameron–Martin formula 2419:Burkholder–Davis–Gundy 1814:Variance gamma process 1327:Option-adjusted spread 1229:Inflation-indexed bond 688: 610: 579: 540: 510: 480: 450: 421: 168:Black–Derman–Toy model 131: 2769:Fixed income analysis 2650:Actuarial mathematics 2612:Uniform integrability 2607:Stratonovich integral 2535:Lévy–Prokhorov metric 2439:Marcinkiewicz–Zygmund 2326:Central limit theorem 1928:Gaussian random field 1757:McKean–Vlasov process 1677:Dyson Brownian motion 1538:Galton–Watson process 1373:Asset-backed security 1337:Weighted-average life 1174:Auction rate security 782:Fixed Income Analysis 689: 611: 580: 554:probability measure; 541: 511: 481: 451: 422: 132: 2725:Time series analysis 2680:Mathematical finance 2565:Reflection principle 1892:Regenerative process 1692:Fleming–Viot process 1507:Stochastic processes 1366:Securitized products 623: 599: 558: 522: 492: 462: 439: 295: 263:volatility structure 164:mathematical finance 56: 2720:Stochastic analysis 2560:Quadratic variation 2555:Prokhorov's theorem 2490:Feynman–Kac formula 1960:Markov random field 1608:Birth–death process 1143:Infrastructure bond 719:stochastic calculus 449:{\displaystyle r\,} 351: 249:Under BDT, using a 2690:Probability theory 2570:Skorokhod integral 2540:Malliavin calculus 2123:Korn-Kreer-Lenssen 2007:Time series models 1970:Pitman–Yor process 1219:Floating rate note 684: 606: 575: 536: 506: 476: 446: 417: 339: 267:interest rate caps 238:My Life as a Quant 149:spot interest rate 127: 2784:Options (finance) 2774:Short-rate models 2756: 2755: 2710:Signal processing 2429:Doob's upcrossing 2424:Doob's martingale 2388:Engelbert–Schmidt 2331:Donsker's theorem 2265:Feller-continuous 2133:Rendleman–Bartter 1923:Dirichlet process 1840:Branching process 1809:Telegraph process 1702:Geometric process 1682:Empirical process 1672:Diffusion process 1528:Branching process 1523:Bernoulli process 1473: 1472: 1426:Exchangeable bond 1352:Yield to maturity 1204:Exchangeable bond 1126:Subordinated debt 362: 160: 159: 125: 2791: 2779:Financial models 2730:Machine learning 2617:Usual hypotheses 2500:Girsanov theorem 2485:Dynkin's formula 2250:Continuous paths 2158:Actuarial models 2098:Garman–Kohlhagen 2068:Black–Karasinski 2063:Black–Derman–Toy 2050:Financial models 1916:Fields and other 1845:Gaussian process 1794:Sigma-martingale 1598:Additive process 1500: 1493: 1486: 1477: 1416:Convertible bond 1259:Zero-coupon bond 1199:Convertible bond 1184:Commercial paper 1067: 1060: 1053: 1044: 1033:, Andrea Ruberto 1019: 1017: 1007: 1005: 1004: 998: 991: 978: 976: 965: 952: 950: 939: 929: 923: 903: 902: 900: 899: 889: 883: 873: 867: 866: 864: 863: 854:. Archived from 848: 842: 841: 839: 838: 829:. Archived from 823: 817: 816: 814: 812: 803: 795: 789: 778: 772: 771: 769: 768: 762: 756:. Archived from 755: 747: 693: 691: 690: 685: 683: 682: 656: 655: 616:, the model is: 615: 613: 612: 607: 584: 582: 581: 576: 573: 572: 545: 543: 542: 537: 534: 533: 515: 513: 512: 507: 504: 503: 485: 483: 482: 477: 474: 473: 455: 453: 452: 447: 426: 424: 423: 418: 416: 415: 402: 401: 383: 379: 363: 361: 360: 347: 338: 333: 332: 251:binomial lattice 176:short-rate model 136: 134: 133: 128: 126: 118: 116: 115: 100: 92: 91: 82: 77: 76: 23:Step 0. Set the 16: 2799: 2798: 2794: 2793: 2792: 2790: 2789: 2788: 2759: 2758: 2757: 2752: 2734: 2695:Queueing theory 2638: 2580:Skorokhod space 2443: 2434:Kunita–Watanabe 2405: 2371:Sanov's theorem 2341:Ergodic theorem 2314: 2310:Time-reversible 2228: 2191:Queueing models 2185: 2181:Sparre–Anderson 2171:Cramér–Lundberg 2152: 2138:SABR volatility 2044: 2001: 1953:Boolean network 1911: 1897:Renewal process 1828: 1777:Non-homogeneous 1767:Poisson process 1657:Contact process 1620:Brownian motion 1590:Continuous time 1584: 1578:Maximal entropy 1509: 1504: 1474: 1469: 1440: 1431:Extendible bond 1421:Embedded option 1397: 1361: 1263: 1224:High-yield debt 1214:Fixed rate bond 1209:Extendible bond 1157: 1138:Government bond 1133:Distressed debt 1099: 1076: 1071: 1027: 1022: 1015: 1010: 1002: 1000: 996: 989: 981: 974: 963: 955: 948: 937: 932: 921: 916: 907: 906: 897: 895: 891: 890: 886: 874: 870: 861: 859: 850: 849: 845: 836: 834: 825: 824: 820: 810: 808: 801: 797: 796: 792: 779: 775: 766: 764: 760: 753: 749: 748: 741: 731: 703:Newton's method 674: 647: 621: 620: 597: 596: 564: 556: 555: 548:Brownian motion 525: 520: 519: 495: 490: 489: 465: 460: 459: 437: 436: 407: 393: 352: 324: 323: 319: 293: 292: 247: 212: 174:) is a popular 107: 83: 68: 54: 53: 51: 47: 28: 12: 11: 5: 2797: 2795: 2787: 2786: 2781: 2776: 2771: 2761: 2760: 2754: 2753: 2751: 2750: 2745: 2743:List of topics 2739: 2736: 2735: 2733: 2732: 2727: 2722: 2717: 2712: 2707: 2702: 2700:Renewal theory 2697: 2692: 2687: 2682: 2677: 2672: 2667: 2665:Ergodic theory 2662: 2657: 2655:Control theory 2652: 2646: 2644: 2640: 2639: 2637: 2636: 2635: 2634: 2629: 2619: 2614: 2609: 2604: 2599: 2598: 2597: 2587: 2585:Snell envelope 2582: 2577: 2572: 2567: 2562: 2557: 2552: 2547: 2542: 2537: 2532: 2527: 2522: 2517: 2512: 2507: 2502: 2497: 2492: 2487: 2482: 2477: 2472: 2467: 2462: 2457: 2451: 2449: 2445: 2444: 2442: 2441: 2436: 2431: 2426: 2421: 2415: 2413: 2407: 2406: 2404: 2403: 2384:Borel–Cantelli 2373: 2368: 2363: 2358: 2353: 2348: 2343: 2338: 2333: 2328: 2322: 2320: 2319:Limit theorems 2316: 2315: 2313: 2312: 2307: 2302: 2297: 2292: 2287: 2282: 2277: 2272: 2267: 2262: 2257: 2252: 2247: 2242: 2236: 2234: 2230: 2229: 2227: 2226: 2221: 2216: 2211: 2206: 2201: 2195: 2193: 2187: 2186: 2184: 2183: 2178: 2173: 2168: 2162: 2160: 2154: 2153: 2151: 2150: 2145: 2140: 2135: 2130: 2125: 2120: 2115: 2110: 2105: 2100: 2095: 2090: 2085: 2080: 2075: 2070: 2065: 2060: 2054: 2052: 2046: 2045: 2043: 2042: 2037: 2032: 2027: 2022: 2017: 2011: 2009: 2003: 2002: 2000: 1999: 1994: 1989: 1988: 1987: 1982: 1972: 1967: 1962: 1957: 1956: 1955: 1950: 1940: 1938:Hopfield model 1935: 1930: 1925: 1919: 1917: 1913: 1912: 1910: 1909: 1904: 1899: 1894: 1889: 1884: 1883: 1882: 1877: 1872: 1867: 1857: 1855:Markov process 1852: 1847: 1842: 1836: 1834: 1830: 1829: 1827: 1826: 1824:Wiener sausage 1821: 1819:Wiener process 1816: 1811: 1806: 1801: 1799:Stable process 1796: 1791: 1789:Semimartingale 1786: 1781: 1780: 1779: 1774: 1764: 1759: 1754: 1749: 1744: 1739: 1734: 1732:Jump diffusion 1729: 1724: 1719: 1714: 1709: 1707:Hawkes process 1704: 1699: 1694: 1689: 1687:Feller process 1684: 1679: 1674: 1669: 1664: 1659: 1654: 1652:Cauchy process 1649: 1648: 1647: 1642: 1637: 1632: 1627: 1617: 1616: 1615: 1605: 1603:Bessel process 1600: 1594: 1592: 1586: 1585: 1583: 1582: 1581: 1580: 1575: 1570: 1565: 1555: 1550: 1545: 1540: 1535: 1530: 1525: 1519: 1517: 1511: 1510: 1505: 1503: 1502: 1495: 1488: 1480: 1471: 1470: 1468: 1467: 1461: 1455: 1448: 1446: 1442: 1441: 1439: 1438: 1433: 1428: 1423: 1418: 1413: 1407: 1405: 1399: 1398: 1396: 1395: 1390: 1385: 1380: 1375: 1369: 1367: 1363: 1362: 1360: 1359: 1354: 1349: 1344: 1339: 1334: 1332:Risk-free bond 1329: 1324: 1319: 1317:Mortgage yield 1314: 1309: 1304: 1299: 1294: 1289: 1284: 1279: 1273: 1271: 1269:Bond valuation 1265: 1264: 1262: 1261: 1256: 1251: 1246: 1244:Perpetual bond 1241: 1236: 1231: 1226: 1221: 1216: 1211: 1206: 1201: 1196: 1191: 1186: 1181: 1176: 1171: 1165: 1163: 1159: 1158: 1156: 1155: 1150: 1148:Municipal bond 1145: 1140: 1135: 1130: 1129: 1128: 1123: 1116:Corporate bond 1113: 1107: 1105: 1101: 1100: 1098: 1097: 1092: 1087: 1081: 1078: 1077: 1072: 1070: 1069: 1062: 1055: 1047: 1041: 1040: 1034: 1026: 1025:External links 1023: 1021: 1020: 1008: 979: 977:on 2012-04-22. 953: 951:on 2008-09-10. 930: 928:: vol.7 No. 3. 908: 905: 904: 884: 868: 843: 818: 790: 773: 738: 737: 730: 727: 695: 694: 681: 677: 673: 669: 666: 663: 660: 654: 650: 646: 643: 640: 637: 634: 631: 628: 604: 593: 592: 591: 590: 571: 567: 563: 532: 528: 517: 502: 498: 487: 472: 468: 457: 444: 434: 428: 427: 414: 410: 406: 400: 396: 392: 389: 386: 382: 378: 375: 372: 369: 366: 359: 355: 350: 346: 342: 336: 331: 327: 322: 318: 315: 312: 309: 306: 303: 300: 246: 243: 220:Emanuel Derman 211: 208: 200:mean-reverting 158: 157: 153: 152: 141: 138: 124: 121: 114: 110: 106: 103: 99: 95: 90: 86: 81: 75: 71: 67: 64: 61: 49: 45: 42: 13: 10: 9: 6: 4: 3: 2: 2796: 2785: 2782: 2780: 2777: 2775: 2772: 2770: 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2342: 2339: 2337: 2334: 2332: 2329: 2327: 2324: 2323: 2321: 2317: 2311: 2308: 2306: 2303: 2301: 2298: 2296: 2293: 2291: 2288: 2286: 2283: 2281: 2278: 2276: 2273: 2271: 2268: 2266: 2263: 2261: 2258: 2256: 2253: 2251: 2248: 2246: 2243: 2241: 2238: 2237: 2235: 2231: 2225: 2222: 2220: 2217: 2215: 2212: 2210: 2207: 2205: 2202: 2200: 2197: 2196: 2194: 2192: 2188: 2182: 2179: 2177: 2174: 2172: 2169: 2167: 2164: 2163: 2161: 2159: 2155: 2149: 2146: 2144: 2141: 2139: 2136: 2134: 2131: 2129: 2126: 2124: 2121: 2119: 2116: 2114: 2111: 2109: 2106: 2104: 2101: 2099: 2096: 2094: 2091: 2089: 2086: 2084: 2081: 2079: 2076: 2074: 2073:Black–Scholes 2071: 2069: 2066: 2064: 2061: 2059: 2056: 2055: 2053: 2051: 2047: 2041: 2038: 2036: 2033: 2031: 2028: 2026: 2023: 2021: 2018: 2016: 2013: 2012: 2010: 2008: 2004: 1998: 1995: 1993: 1990: 1986: 1983: 1981: 1978: 1977: 1976: 1975:Point process 1973: 1971: 1968: 1966: 1963: 1961: 1958: 1954: 1951: 1949: 1946: 1945: 1944: 1941: 1939: 1936: 1934: 1933:Gibbs measure 1931: 1929: 1926: 1924: 1921: 1920: 1918: 1914: 1908: 1905: 1903: 1900: 1898: 1895: 1893: 1890: 1888: 1885: 1881: 1878: 1876: 1873: 1871: 1868: 1866: 1863: 1862: 1861: 1858: 1856: 1853: 1851: 1848: 1846: 1843: 1841: 1838: 1837: 1835: 1831: 1825: 1822: 1820: 1817: 1815: 1812: 1810: 1807: 1805: 1802: 1800: 1797: 1795: 1792: 1790: 1787: 1785: 1782: 1778: 1775: 1773: 1770: 1769: 1768: 1765: 1763: 1760: 1758: 1755: 1753: 1750: 1748: 1745: 1743: 1740: 1738: 1735: 1733: 1730: 1728: 1725: 1723: 1722:Itô diffusion 1720: 1718: 1715: 1713: 1710: 1708: 1705: 1703: 1700: 1698: 1697:Gamma process 1695: 1693: 1690: 1688: 1685: 1683: 1680: 1678: 1675: 1673: 1670: 1668: 1665: 1663: 1660: 1658: 1655: 1653: 1650: 1646: 1643: 1641: 1638: 1636: 1633: 1631: 1628: 1626: 1623: 1622: 1621: 1618: 1614: 1611: 1610: 1609: 1606: 1604: 1601: 1599: 1596: 1595: 1593: 1591: 1587: 1579: 1576: 1574: 1571: 1569: 1568:Self-avoiding 1566: 1564: 1561: 1560: 1559: 1556: 1554: 1553:Moran process 1551: 1549: 1546: 1544: 1541: 1539: 1536: 1534: 1531: 1529: 1526: 1524: 1521: 1520: 1518: 1516: 1515:Discrete time 1512: 1508: 1501: 1496: 1494: 1489: 1487: 1482: 1481: 1478: 1465: 1462: 1459: 1456: 1453: 1450: 1449: 1447: 1443: 1437: 1436:Puttable bond 1434: 1432: 1429: 1427: 1424: 1422: 1419: 1417: 1414: 1412: 1411:Callable bond 1409: 1408: 1406: 1404: 1400: 1394: 1391: 1389: 1386: 1384: 1381: 1379: 1376: 1374: 1371: 1370: 1368: 1364: 1358: 1355: 1353: 1350: 1348: 1345: 1343: 1340: 1338: 1335: 1333: 1330: 1328: 1325: 1323: 1322:Nominal yield 1320: 1318: 1315: 1313: 1310: 1308: 1305: 1303: 1300: 1298: 1297:Current yield 1295: 1293: 1292:Credit spread 1290: 1288: 1285: 1283: 1280: 1278: 1275: 1274: 1272: 1270: 1266: 1260: 1257: 1255: 1252: 1250: 1249:Puttable bond 1247: 1245: 1242: 1240: 1237: 1235: 1232: 1230: 1227: 1225: 1222: 1220: 1217: 1215: 1212: 1210: 1207: 1205: 1202: 1200: 1197: 1195: 1192: 1190: 1187: 1185: 1182: 1180: 1179:Callable bond 1177: 1175: 1172: 1170: 1167: 1166: 1164: 1160: 1154: 1151: 1149: 1146: 1144: 1141: 1139: 1136: 1134: 1131: 1127: 1124: 1122: 1119: 1118: 1117: 1114: 1112: 1109: 1108: 1106: 1102: 1096: 1093: 1091: 1088: 1086: 1083: 1082: 1079: 1075: 1068: 1063: 1061: 1056: 1054: 1049: 1048: 1045: 1038: 1035: 1032: 1029: 1028: 1024: 1014: 1009: 999:on 2011-01-29 995: 988: 984: 980: 973: 969: 962: 958: 954: 947: 943: 936: 931: 927: 920: 915: 914: 913: 912: 894: 888: 885: 881: 877: 872: 869: 858:on 2016-05-24 857: 853: 847: 844: 833:on 2010-03-28 832: 828: 822: 819: 807: 800: 794: 791: 788: 785:, p. 410, at 784: 783: 777: 774: 763:on 2011-10-07 759: 752: 746: 744: 740: 736: 735: 728: 726: 724: 720: 716: 712: 708: 707:secant method 704: 700: 679: 675: 671: 667: 664: 661: 658: 652: 648: 644: 638: 632: 629: 626: 619: 618: 617: 602: 588: 569: 565: 561: 553: 549: 546:= a standard 530: 526: 518: 500: 496: 488: 470: 466: 458: 442: 435: 432: 431: 430: 429: 412: 408: 404: 398: 394: 390: 387: 384: 380: 373: 367: 364: 357: 353: 348: 344: 340: 334: 329: 325: 320: 316: 310: 304: 301: 298: 291: 290: 289: 287: 282: 280: 276: 272: 268: 264: 260: 256: 252: 244: 242: 240: 239: 235: 231: 230: 225: 224:Goldman Sachs 221: 217: 216:Fischer Black 209: 207: 205: 201: 197: 193: 189: 185: 181: 177: 173: 169: 165: 156: 150: 146: 142: 139: 122: 112: 108: 104: 101: 97: 88: 84: 79: 73: 69: 62: 59: 43: 40: 39: 38: 36: 32: 26: 21: 18: 17: 2660:Econometrics 2622:Wiener space 2510:Itô integral 2411:Inequalities 2300:Self-similar 2270:Gauss–Markov 2260:Exchangeable 2240:Càdlàg paths 2176:Risk process 2128:LIBOR market 2062: 1997:Random graph 1992:Random field 1804:Superprocess 1742:Lévy process 1737:Jump process 1712:Hunt process 1548:Markov chain 1445:Institutions 1403:Bond options 1347:Yield spread 1239:Lottery bond 1169:Accrual bond 1095:Fixed income 1039:, Serkan Gur 1001:. Retrieved 994:the original 972:the original 967: 946:the original 941: 925: 910: 909: 896:. Retrieved 887: 876:Phelim Boyle 871: 860:. Retrieved 856:the original 846: 835:. Retrieved 831:the original 821: 809:. Retrieved 805: 793: 787:Google Books 780: 776: 765:. Retrieved 758:the original 733: 732: 696: 594: 587:differential 552:risk-neutral 283: 248: 236: 227: 213: 180:bond options 171: 167: 161: 154: 22: 19: 2705:Ruin theory 2643:Disciplines 2515:Itô's lemma 2290:Predictable 1965:Percolation 1948:Potts model 1943:Ising model 1907:White noise 1865:Differences 1727:Itô process 1667:Cox process 1563:Loop-erased 1558:Random walk 1342:Yield curve 1302:Dirty price 1277:Clean price 1153:Global bond 1121:Senior debt 1111:Agency bond 1074:Bond market 723:martingales 715:algorithmic 261:), and the 259:yield curve 35:iteratively 2763:Categories 2715:Statistics 2495:Filtration 2396:Kolmogorov 2380:Blumenthal 2305:Stationary 2245:Continuous 2233:Properties 2118:Hull–White 1860:Martingale 1747:Local time 1635:Fractional 1613:pure birth 1003:2011-04-08 898:2021-06-09 862:2010-06-14 837:2010-04-26 767:2011-07-21 729:References 271:as implied 255:calibrates 196:stochastic 186:and other 145:zero-price 2627:Classical 1640:Geometric 1630:Excursion 1282:Convexity 1090:Debenture 957:Boyle, P. 711:bisection 701:—such as 668:σ 649:θ 633:⁡ 603:σ 497:σ 467:θ 395:σ 368:⁡ 354:σ 341:σ 326:θ 305:⁡ 269:(usually 184:swaptions 120:Δ 109:σ 63:⁡ 31:spot rate 2748:Category 2632:Abstract 2166:Bühlmann 1772:Compound 1357:Z-spread 1312:I-spread 1307:Duration 985:(2008). 983:Hull, J. 911:Articles 811:19 March 550:under a 349:′ 275:Black-76 245:Formulae 2255:Ergodic 2143:Vašíček 1985:Poisson 1645:Meander 1466:(SIFMA) 806:soa.org 273:by the 210:History 2595:Tanaka 2280:Mixing 2275:Markov 2148:Wilkie 2113:Ho–Lee 2108:Heston 1880:Super- 1625:Bridge 1573:Biased 1460:(ICMA) 1454:(CMSA) 1287:Coupon 1189:Consol 433:where, 253:, one 234:memoir 190:; see 166:, the 2448:Tools 2224:M/M/c 2219:M/M/1 2214:M/G/1 2204:Fluid 1870:Local 1016:(PDF) 997:(PDF) 990:(PDF) 975:(PDF) 964:(PDF) 949:(PDF) 938:(PDF) 922:(PDF) 802:(PDF) 761:(PDF) 754:(PDF) 734:Notes 709:) or 705:(the 2400:Lévy 2199:Bulk 2083:Chen 1875:Sub- 1833:Both 1085:Bond 813:2024 585:its 265:for 1980:Cox 721:or 172:BDT 162:In 48:; r 2765:: 2398:, 2394:, 2390:, 2386:, 2382:, 966:. 940:. 924:. 804:. 742:^ 725:. 630:ln 365:ln 302:ln 288:: 281:. 241:. 218:, 182:, 60:ln 37:: 33:, 2402:) 2378:( 1499:e 1492:t 1485:v 1066:e 1059:t 1052:v 1006:. 901:. 865:. 840:. 815:. 770:. 680:t 676:W 672:d 665:+ 662:t 659:d 653:t 645:= 642:) 639:r 636:( 627:d 589:. 570:t 566:W 562:d 531:t 527:W 501:t 471:t 443:r 413:t 409:W 405:d 399:t 391:+ 388:t 385:d 381:] 377:) 374:r 371:( 358:t 345:t 335:+ 330:t 321:[ 317:= 314:) 311:r 308:( 299:d 170:( 123:t 113:i 105:= 102:2 98:/ 94:) 89:d 85:r 80:/ 74:u 70:r 66:( 50:d 46:u

Index

risk-neutral probability
spot rate
iteratively
zero-price
spot interest rate
mathematical finance
short-rate model
bond options
swaptions
interest rate derivatives
Lattice model (finance) § Interest rate derivatives
stochastic
mean-reverting
log-normal distribution
Fischer Black
Emanuel Derman
Goldman Sachs
Financial Analysts Journal
memoir
My Life as a Quant
binomial lattice
calibrates
yield curve
volatility structure
interest rate caps
as implied
Black-76
interest rate derivatives
stochastic differential equation
Brownian motion

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